Scenario 2: Credit Cards & Buying an Item

This week we are talking about budgeting/tracking your spending. I want you to think about something you really want. I then want you to think about saving money to pay for that item in full. I also want you to think about what would happen if you paid for that money with a credit card and not being able to pay off that balance (We will talk about credit later).

I want to buy an iPad Pro and some accessories for it. Look at this chart and see the difference between paying in full and not being able to pay for this in full. Answer the questions at the bottom of the chart.

• Is it better to save for the iPad or use the credit card and their monthly payments (with interest) to pay for the iPad?

• Is it hard for you to save for what you want to buy? If not, why? If it is, do you think you will try to save before buying?

• When can using a credit card when you dont have the money be a good idea?

• What happens to your credit score when you cannot make payments? How does this impact your future? (we have not covered this, but look this up and see what you can find) Does knowing this change your view on using credit cards and saving for something?

Minimum payments Interest Payoff Paid Time Cost of Credit Item Card Interest Rate Able to pay off after purchase? Total paid for item $1,500 19.02% Yes n/a $0 $1,500 Able to pay full purchase Right away $1,500 19.02% No $25/month $3,295 $4,795 Not able to pay full 192 months Minimum payments Interest Payoff Paid Time Cost of Credit Item Card Interest Rate Able to pay off after purchase? Total paid for item $1,500 19.02% Yes n/a $0 $1,500 Able to pay full purchase Right away $1,500 19.02% No $25/month $3,295 $4,795 Not able to pay full 192 months